Economists shouldn’t underestimate the power of a good story - narrative matters

 Investors should take note of some intriguing research floating around the edge of the Jackson Hole meeting about the importance of storytelling in monetary policy.

 After the 2008 financial crisis, Robert Shiller, the Nobel Prize-winning economist, urged his colleagues to study how “narratives” shape sentiment and thus economic trends. And one encouraging post-crisis development in economics is that a swelling number of young behavioural finance economists have heeded Shiller’s call.

 So if I were his speechwriter, I would  argue that inflation will fall when rates go up, and promise to keep raising those rates until price growth is at a sensible level. 

That will not be politically popular ahead of a crucial midterm election. But it is at least a crystal clear message — or it would be if the Fed actually does it.

Gillian Tett FT 25 August 2022

https://www.ft.com/content/756f605a-7ae3-469a-8a68-78ee41ea8b4f

Gillian Tett is chair of the editorial board and editor-at-large. Tett’s past roles at the FT have included US managing editor, assistant editor, capital markets editor, deputy editor of the Lex column, Tokyo bureau chief, and a reporter in Russia and Brussels.

https://www.ft.com/gillian-tett

Hon är också en av mina Gurus.

Narrative Economics: How Stories Go Viral and Drive Major Economic Events by Robert J. Shiller

https://press.princeton.edu/books/hardcover/9780691182292/narrative-economics

“We have highly priced markets in the stock market, the bond market and the housing market,” Shiller

https://englundmacro.blogspot.com/2020/07/we-have-highly-priced-markets-in-stock.html